Updated: Feb 10, 2020
A recent Washington panel I attended attempted to justify the Federal Trade Commission’s dangerous, damaging, seriously questionable case against Qualcomm that’s under appeal.
The panelists were from commercial implementers who’d love to get Qualcomm’s state-of-the-art, standard-setting patents at bargain-basement rates or affiliated with groups supported by the Big Tech companies that have led the charge against Qualcomm and that have long worked to weaken patents – a fundamental property right.
The box score: Panelists played loose with the facts. They generalized. They used a broad brush where nuance and specificity were needed. They conflated “the 5G standard” as though there were a single element to be standardized in this wireless technology. Their "competition" sounded awfully Orwellian. Their assertions may seem plausible to those unfamiliar with the intersection of the complex law and policy of patents and antitrust.
For instance, at least two panelists made it sound as if an innovator’s standard-essential patents leave them bound to a “duty to deal” with any and all comers (this ignores the unanimous Supreme Court ruling in Trinko). They turned FRAND (fair, reasonable and nondiscriminatory) commitments into a compulsory licensing clause, with the implementer effectively able to dictate the terms, including the price.
In the Qualcomm case, a federal judge in California ruled in favor of the FTC last year in a serious blow to property rights. Her far-reaching decision forces Qualcomm to license its technology to competitors, including China’s Huawei. It orders the company to sell chips apart from a license (undoing established industry practice) and renegotiate all its licensing agreements with companies worldwide. Her order imposes a global remedy that seriously diminishes Qualcomm’s patent rights.
Fortunately, the 9th Circuit has issued a stay of these harmful remedies while the case is on appeal – which will be heard in February.
At the briefing, one panelist made the preposterous claim that a win for Qualcomm would benefit Huawei. But in fact, the FTC called a Huawei executive as its leadoff witness. Huawei wanted the FTC to pursue this case because it weakens the U.S. leader in 5G.
And in fact, three government agencies have taken the extraordinary step of weighing in on behalf of Qualcomm because of the national security implications. The Department of Justice filed an amicus brief in support of Qualcomm, joined by the Departments of Defense and Energy – all of whom understand the national security implications of 5G leadership more than advocates for commercial competitors. In their brief, the agencies wrote:
“Accordingly, a reduction in Qualcomm’s leadership in 5G innovation and standard-setting, ‘even in the short-term,’ could “significantly impact U.S. national security” by enabling foreign-owned firms to expand their influence. . . . This is a ‘critical period of time,’ and allowing foreign-aligned firms to drive the development of 5G standards could have long-term ramifications, including cyberespionage.”
As I’ve written before, the case against Qualcomm is an attack on core property rights that incentivize companies and inventors to create new technologies that help America maintain its global innovation leadership. Far-reaching remedies that undermine those protections and hobble our leading companies only harm innovation and our national security. The real winner of the FTC case would be Huawei and the real loser American innovation.